All Forum Posts by: JD Martin

My general rule of thumb is to (reasonably) spend as little as possible on purchases that don't make money. If your consideration was to sell and buy something that was even better than what you have, I would probably do it - but you are looking for a "dream" house, which generally doesn't equate well into an income-producing asset, and you look young enough and lacking in funds enough that you might consider building your portfolio longer before going that route. 

As Ryan mentioned, that's only going to work if you are under contract for a steal because they need that same cushion in order to make any money; if you are, why not buy it yourself? I am guessing that you have something under contract that no one has any interest in at the contract price? 

Generally it's not that these costs don't exist, it's that there's enough equity to absorb the costs on behalf of the seller. 

Pretty cheap to fix. I would probably fix it the first time and bill them the second. You should be able to do this yourself. 

 More or less my strategy as well. Capital that is sitting around is like a guy on unemployment. Couple months or so, just a plain old bank account that has the ability to make online transfers. 

Having some kind of carpet on the treads is always a good solution because carpet is naturally non-slip. My personal preference is wood treads, painted risers, with a runner over top the wood to keep it protected. Second option is the same basic steps but with carpet treads on the wood to protect. 

You need to find a trustworthy HVAC guy. Let him buy the unit - he is going to get a better deal than you, and will be the one that has to deal with problems off the shelf if he gets something bad from the manufacturer. Putting in HVAC is not like installing a dishwasher, where you or the plumber are going to get the same unit. None of the major carriers are going to sell directly to you, so that means you either have to go off-brand or second-hand/dent or damage market. Being that installation is a big part of this project, and as someone else said 2nd hand units are often bad or stolen,  this isn't really a good DIY project. 

What's ideal? 0% is ideal. What's normal? Depends on a lot of factors - what demographic you are catering to, the local real estate market, the local economy, the pricing of your individual unit, the neighborhood, etc. 

In my opinion, there's no such thing as "too low" in vacancy rates for your portfolio. Using your proposed rationale that "too low" means you are renting too cheap, let's look at numbers. Let's say you rent your apartments for $1000, and the market rate is $1200 (so you are 20% below market, a pretty drastic figure). Because of this you have essentially no vacancies, while "the market" has vacancy rates of 8% (one month average).

12 months x 1000 = $12,000

12 months x 1200 x .92 = 13,248 ($1,248 difference)

So in this situation, you could gain an additional thousand bucks by raising your rents to market level. On the other hand, having somewhat below market rates means you have the pick of the litter when it comes to tenants, because everyone wants to save money. In this example, you are so far below market you could probably come up $50-75 per month, maintain the essentially 0% vacancy, and still have pick of the litter:

12 months x 1050 = $12, 600 ($648 difference)

You always have to consider these things in the context of your particular situation. If there is no avoiding an 8-10% vacancy rate almost regardless of your rents, because of other factors - poor neighborhood, unstable economy, etc - then you would probably be wise to just price right at market or maybe even a hair above and accept the vacancies. If you live in a seller's market, you can probably have a much better landlording experience going a route like I posted above than the guy who just has to have that extra $600 annually. 

LoL to all the posts so far. As for the OP, it is a terrible idea, aside from being dubious from a legal point of view. I would think you would have to include that fee in the lease from the beginning, or have the tenants sign an addendum for something like that, and I doubt you'd ever collect it and would look like a fool in court. 

I can see certain incentive working and I can appreciate the "thinking outside the box" post. The water and fire damage, as someone already posted, would probably be caused by as many tenants as by acts of god if you instituted something like that. 

I have nothing going on right now other than looking at properties; I have 100% occupancy right now, life is good!